The 4 retirement problems Obama must solve

No time to rest on your laurels, Mr. President; retirees need action

Congrats on your re-election! I hope you’ll forgive me for not dwelling on your victory and getting straight to the point. With all due respect, it’s time for you to tackle this nation’s retirement security issues, including Social Security, Medicare, and a host of other challenges that threaten the financial well-being and standard of living of current and future retirees. Here’s the shortlist.

Social Security

Reuters

President Obama waves before beginning Tuesday-night speech in Chicago.

For the past four years, more really, politicians in this country have been kicking the can down the road. They’ve not had a serious discussion about how to fix Social Security despite years of knowing about a problem that will affect millions of Americans in 21 short years.

Perhaps a reminder is in order? Come 2033, unless Congress acts, the Social Security Trust Fund will be bankrupt; it will be unable to pay scheduled benefits in full on a timely basis. In fact, come 2033, Social Security would only collect enough tax revenue each year to pay about 75% of benefits.

Why is that we can mobilize armies of people and relief efforts for Hurricane Sandy, but we can’t muster up the energy and the will to tackle the Social Security problem?

Here’s my advice: Put this on your list of things to do over the next four years. And don’t just give it lip service as you did during the campaign. Do it. Figure out a way, just as the Greenspan Commission did back in the early 1980s, to preserve what has become—for better or worse—a much-needed source of income for retirees in this country, even those in the upper income quintile.

President Obama re-elected

(53:06)

A review of how President Obama won re-election, including where the balance of power sits in Washington, plus analysis of how this will affect U.S. foreign policy and diplomatic relations in Europe, Asia and around the world.

But the longer we wait, the more drastic the problem becomes and the more draconian the solutions will be. For what it’s worth, I don’t think we should leave this problem to our children to fix. So, for my children’s sake, for your children’s sake, and for the sake of all the children of this country, fix Social Security now.

Medicare is, of course, a problem much larger than Social Security, especially since the solutions to fixing it aren't nearly as neat. With Social Security there is, for instance, some degree of certainty. We know how much money is coming into the system and how much will be going out and for how many years. (Continued below.)

In contrast, as the Medicare trustees said in their most recent report, “Projections of Medicare costs are highly uncertain, especially when looking out more than several decades.” One reason for this uncertainty is that scientific advances will make possible new interventions, procedures, and therapies. What’s more, the financial outlook for Medicare is also uncertain because some provisions of current law that are designed to reduce costs may not be sustained.

The clearest example of this issue, the trustees wrote, is the growth rate formula for physician fee schedule payment levels. The projections in the most recent Medicare trustee report, for instance, assume that, as required by current law, the Centers for Medicare and Medicaid Services will implement a reduction in Medicare payment rates for physician services of more than 30% at the start of 2013. “However, it is a virtual certainty that lawmakers, cognizant of the disruptive consequences of such a sudden, sharp reduction in payments, will override this reduction just as they have every year since 2003,” the trustees wrote.

What’s more, Mr. President, the health-care reforms enacted so far under your first administration are another, and even larger, source of policy-related uncertainty.

“Given these uncertainties, future Medicare costs could be substantially larger than shown in the Trustees’ current-law projections,” the trustees wrote. “Growth of this magnitude, if realized, would substantially increase the strain on the nation’s workers, the economy, Medicare beneficiaries, and the federal budget.” Read that report.

But just because Medicare is a big problem doesn’t mean we shouldn’t search for ways to fix it. In fact, the trustees are urging that reforms be considered.

The good news is that we already know some of the approaches that seem promising and the ideas worth considering. We, of course, know about cutting Medicare costs by reductions in reimbursement rates. And you’ve already said you want the Medicare Independent Payment Advisory Board to recommend program cost reductions if Medicare spending grows faster than gross domestic product plus 0.5 percentage point, among other tactics. Read that plan.

Others, meanwhile, have proposed reforming Medicare through a premium support model. For instance, there is the Domenici-Rivlin proposal, which would offer seniors the opportunity to choose among comprehensive private health plans offered on a regulated exchange. And congressional Republicans have proposed plans where seniors would use federal funds to purchase insurance on the private market—and the Romney-Ryan campaign made a similar proposal.

Suffice to say, if we able to find minds bright enough to conceive Medicare in 1965, surely we can find minds bright enough to fix it now.

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